How to Find the Opportunity in Crisis

In order to properly understand the opportunities that are coming out of the current crisis in hospitality we need to examine two different vectors: short-time secular trends and long-term behavioral shifts. Short-time secular trends are the direct responses to the current crisis. Long-term behavioral shifts refer to the ways travel behavior will change over the long run. The more frequently we engage in a new behavior (e.g. virtual meetings) the more likely we are to stick with those habits. One potential long-term behavioral shift that increases in probability with each virtual meeting is the potential downsizing of corporate travel budgets. Let’s dive in.

Short-time Secular Trends

The first secular opportunity lies in addressing guest concerns by going contactless. Hoteliers are mapping out their guest journeys and identifying all the ways they can limit guest interaction from check-in to check-out. At check-in Hotel Tech Report is seeing a massive surge in demand for mobile key. We’re seeing hotels finally rip out landlines and paper compendiums in guest rooms. Those tools are being replaced by voice devices like Volara, guest messaging software and guest room tablets. While guest room tablets aren’t contactless, they are extremely easy to sanitize.

Sanitation

In the last 5-10 years we’ve seen an explosion of hotels getting hacked which has led to a heightened focus on cyber security. In the same way that computer viruses have changed our online behavior, biological viruses are demanding that hotels mitigate health risks for guests. Hoteliers are adopting technology like the Xenex sanitization robot and Pure Rooms.

Remote Property Management

Property management today is similar to owning a classic race car. You need to run the engine every once in a while, to ensure the car remains functioning. Buildings need to be constantly tested when they’re not being used, from plumbing to HVAC, and everywhere in between. As the New York Times recently pointed out, closed hotels (and other buildings) face a new kind of health risk, legionnaires disease, if not properly maintained. ALICE, for example, has launched free maintenance checklist software for hoteliers to ensure their buildings stay operating smoothly upon opening.

Long-term Behavioral Shifts

If there’s one thing that we know for sure, it’s that nobody actually knows what the future holds. Rather than predict what will happen we’re going to look at what could change in guest behavior and identify ways that we will need to adapt if those changes happen.

As I wrote in a recent letter to our Hotel Tech Report community, “The biggest barriers to adopting technology are broken down right now in ways they will never be again - take advantage of that to optimize your business before it's too late.”

Jeff Bezos famously said that the trick to Amazon’s success is that he never tried to build the business around predicting change in the future. He built Amazon around the things he knew wouldn’t change. He knew that people would always want the best prices and convenience.

Below we’re going to outline things that might reasonably change in the hotel business due to the crisis but show how we can act on things that we know won’t change to position ourselves for a recovery.

Shift 1: Clean Slate Revenue Management

Most Revenue Management Systems use historical data to forecast and price rooms in the future. The fundamentals of revenue management get completely turned on their head in a scenario like we’re in today. Firstly, there is no demand to optimize pricing around. Lowering rates can shift share but it cannot increase demand that doesn’t exist. The savviest revenue managers will carefully calibrate their revenue management systems based on changing price elasticity and evolving market conditions instead of cutting across the board. They will also employ strategies and tactics like real time pricing in order to steal share in the early innings of the recovery.

Global consulting behemoth BCG said it best, “Companies that move the fastest and remain the most flexible in understanding and adapting to these new conditions have the potential to gain significant market share and secure their positions.”

The question becomes, in a world where historical data doesn’t help us forecast, is your property prepared to capture your share of the market?

What won’t change: The hotel with the right price for the right guest will win the most profitable business

How to adapt: Ensure that your revenue management system can operate effectively without relevant historical data by either manually calibrating inputs and assumptions, leveraging real time pricing, or opting for a controlled automation that provides a level of control you are comfortable with while also crunching numbers quick and efficiently

Shift 2: Dramatically Reduced MICE Market

Remote work is eating the world. While more of us have got “Zoom fatigue” and “webinar fatigue” than have got COVID itself, it’s undeniable that employers understand how to navigate and be productive in a remote environment in a whole new way.

In the short-time, meetings and events are completely shuttered. In the medium to long-term, they’ll recover but it’s unlikely that they’ll get back to where they were as corporate budgets are slashed and employers need to do more with less. Hotel sales teams will need to get far more efficient at sales and will need to evolve their processes to look more like SaaS businesses.

Group business of the past relied on heavy back and forth negotiation. In the future, hotel’s that don’t adapt online booking and instant RFP management will be left behind. Here’s an example of why:

I was throwing a Hotel Tech Report party and was emailing back and forth with the Director of Sales from a hotel that will go unnamed in Downtown Los Angeles. After weeks of prodding for menus, pricing and more I decided to look elsewhere. I stumbled across another venue’s website that allowed me to see instant pricing and book on the spot. The first hotel had an unbelievable rooftop, but they lost the business because of the sales experience.

As group business comes back it will be slim pickings - hotels that want to win will need to make the buyer journey 100% frictionless as corporate planners are working remote and are themselves time strapped. Hotels that adapt online meeting space booking and automated, transparent and instant RFPs will take an outsized share of the corporate market in the recovery.

What won’t change: Corporate planners are busy and all else equal they will gravitate towards more frictionless purchase experiences

How to adapt: Create a frictionless experience for meeting planners to browse and book at your property the same way that leisure travelers can.

Shift 3: Stretched Operational Needs

Like every business on the planet, hotels today are being asked to do more with less given large furloughs and layoffs. That’s fine for now but as the markets open up hotels will need to staff up quickly and ramp that new staff to ensure quality and consistency for guests.

In the past, some hotels have digitized SOPs with team collaboration platforms, these platforms will be even more important than ever in the next phase of the recovery and beyond. We’re in this strange world where four-months ago labor was the hotel industry’s biggest challenge with rising costs and yet here we are - labor is the loosest it’s ever been with near depression level unemployment. Hotels will need to onboard faster than ever before and they won’t have the capacity to hand hold each new associate through onboarding running on a shoestring budget.

What won’t change: Running a hotel will always be incredibly complex.

How to adapt: Properties need to standardize and digitize SOPs with staff collaboration platforms.

Shift 4: Zero Sum Customer Acquisition

Similar to our discussion about the MICE market earlier, leisure markets are undeniably smaller than previously. Some forecast that business travel will come back first and other “experts” say exactly the opposite. We just don’t know.

What we do know is that at least for the next few months and most likely for (at least) the duration of 2020 the travel market in general is going to be smaller. The hotels who can acquire and convert guests efficiently will capture outsized percentages of their respective markets.

It is absolutely critical to find a strong digital marketing agency partner who understands customer acquisition and can scale ads so that you don’t end up relying solely on the OTAs who will squeeze your hotel’s profitability.

Last year the market was booming and there was plenty of demand to go around. Tomorrow, demand trends will be flipped upside down and you’ll need to adapt quickly. If leisure drive markets come back first, as many predict, you’ll need to get really good at database marketing and local SEO/PPC. As international markets begin to open up again (whenever that is) you’ll need to quickly pivot and expand your marketing strategy.

What won’t change: There will be a finite amount of bookings in the market at any given time. The hotel who understands guest segmentation and how to acquire those guests most efficiently will outperform the comp set.

How to adapt: Find a great marketing partner and optimize your marketing tech stack around holistic customer acquisition.

We are still in the eye of the storm. Nobody knows where the market is going or how it evolves. The best we can do is prepare for the future by optimizing the aspects of our business that don’t require us to be pundits or forecasters - it turns out that humans are really bad at predicting the future. We need to remain lean, nimble and be ready to pivot at the drop of a dime. That’s something hoteliers aren’t used to. What are the characteristics and aspects of your hotel business that you know won’t change in any circumstance moving forward?